Marathon Continues Its Long Run

CHICAGO, IL - MAY 22: A sign marks the location of a Marathon gas station on May 22, 2014 in Chicago, Illinois. Marathon Petroleum Corp. has agreed to purchase Hess gasoline stations for $2.6 billion. The acquisition will expand Marathon Petroleums retail presence from nine to 23 states. (Photo by Scott Olson/Getty Images)

Marathon Petroleum (MPC-US)

Overall Grade: A+

The CressCap five factor model analysis ranks Marathon Petroleum Company as one of the top U.S. equities. The foundation of our recommendations is to identify companies that perform best and worst on the collective basis of value, growth, EPS revisions, profitability, and LT momentum. The CressCap systematic trading model gathers data daily for 6,500 companies globally and assigns academic grades (A - F) for each financial metric. These grades are scored relative to its region/sector. MPC’s sector rank of 7 out of 96 U.S. Energy stocks is reflective of Marathon’s leading position in the energy sector.

Click here to see the grading methodology. CressCap uses a 5 factor model to select the best-performing stocks. Our data is updated daily and the academic grades (A - F) for each financial metric are scored and ranked on a regional/sector relative basis. The foundation of our recommendations is to identify companies that possess collective characteristics in each category of value, growth, EPS revisions, profitability and LT momentum. Academic grades of C or better indicate that each metric scores well compared to the peer sector.CressCap Investment Research

At an overall grade of A+, Marathon Petroleum is expected to benefit from improving EPS revisions and strong price momentum. Marathon received a high grade based on our sector relative analysis using the following criteria of Value, Growth, EPS revisions, Profitability, and Momentum. The CressCap systematic trading model first identified MPC as a buy in early July 2017, when we recommended the company at $53.10. Since the initial recommendation, the stock’s price has rallied by 24.6%. We continue to recommend MPC based on its strong financial metrics as ranked by CressCap, and the company’s strong ranking in the energy sector relative to its peers.

MPC benefits from expanding crack margins, usually associated with falling oil prices. It also is expected to complete the buyout of assets from parent Marathon Oil (MRO), increasing operating leverage. Investment distribution rights (IDRs) will be eliminated as transaction is completed, simplifying the capital structure and focusing management on organic growth rather than M&A. Should demand for gasoline increase, MPC potentially would gain from spread expansion due to constraints in US refining capacity, currently near peak utilization rates.

The company has shown positive Q4 op margin expansion to 5.2% from 3.2% yoy. In the same time frame, the company experienced revenue growth of 24.1%. At the beginning of February, the company released its annual report showing revenue growth of 21.9% and EPS growth of 204.5%. Additionally, the company reported operating margin expansion to 5.4% from 3.7%. In recent weeks, the EPS revisions grade has moved to a B+ from a C in January. This signifies that Street analysts believe the company will show improving EPS growth rates in the next few quarters.

Technically, MPC is holding trend support that is currently around $59.60. Weekly RSI has confirmed the recent highs at the end of January. Trend resistance is running around $80 at present. One potential concern is the gradual reduction in volume as price worked higher over the last two years, though this is true of stocks in general over the same period. MPC’s favorable performance, as well as the consistent strong grades the company has earned, suggest to us an opportunity for a long position in MPC.

I am the Technical Strategist for CressCap Investment Research, a pioneer in the fusion of statistical computing systems and research analytics. I was the first tech analyst at Jefferies & Co, covering enterprise software companies in 1999 and founded a research boutiq...